What is business insurance?
Business or commercial insurance includes a broad range of policy options designed to protect businesses from financial loss. Every commercial operation has its own unique set of risks, which means a commercial insurance policy must be tailored to the business.
Many factors, from the size of your company, to the number of workers you employ, the materials they handle, and whether you have business vehicles, will determine the specific coverage you need to mitigate risk and protect your company’s financials.
What does business insurance cover?
Business insurance coverage for a commercial operation can include the following and more:
- General liability insurance: Covers third-party liability claims for injuries to other people.
- Professional liability and malpractice insurance: Covers professionals against loss due to negligent professional duty, wrongful acts, and advice and services that lead to another person’s loss or injury.
- Product liability insurance: Covers against faulty products and damage, illness, injury or death that may occur from using a faulty product.
- Property insurance: Covers loss and damage to your commercial business property due to fires, storms and other causes.
- Commercial vehicle insurance: Covers commercial vehicles and drivers for collision, liability, property damage, personal injury and comprehensive coverage (also known as “other than collision”).
- Workers’ compensation: Covers your employees if they get ill or are injured while working on the job.
- Loss of income: Covers your business expenses, such as rent and employee wages, if you can’t operate your business.
- Key person insurance: Covers loss of income that may result from the head of the business or other key personnel becoming incapacitated or passing away (also known as key man insurance).
- Cybercrime insurance: Provides protection for risks due to Internet use and online communications.
- Records retention policies: Covers loss of important data and financial records.
- Specialty coverage: Insurance that covers various specific business risks, such as those of landlords, farmers, and commercial operations that put on one-day events, such as seminars or concerts.
Is business insurance required by law?
Business insurance is required by law, but only under certain conditions. The following business insurance is required by law if it is applicable to your situation:
- Unemployment insurance: Applies to a business that has employees and may be obligated to pay unemployment insurance taxes under prescribed conditions. If these conditions are applicable to your business, then you must register your business with the state work force’s agency.
- Workers’ compensation insurance: If your business has employees, you are most likely legally obligated to carry workers’ compensation insurance, either on a self-insured basis or through a commercial insurance carrier or a state workers’ compensation program. Workers’ compensation laws vary by state.
- Professional liability insurance: Some states require specified professionals to carry insurance against professional liability.
- Disability insurance: Several states require that a business have partial wage replacement insurance coverage for eligible employees for non-work related injury or illness. These states are California, Hawaii, New Jersey, New York, Puerto Rico and Rhode Island.
What business insurance do I need?
Depending on the nature of your business and any insurance that you are legally obligated to carry, the following types of business insurance should be considered essential:
- General liability insurance: Coverage against accidents, injuries and negligence claims.
- Product liability insurance: Coverage against product defects.
- Professional liability insurance: Covers professionals against malpractice, negligence or errors.
- Commercial property insurance: Covers against damage to your business property, such as from a fire or a severe storm.
- Business interruption insurance: Protects your business if you are no longer able to conduct your business because of a loss.
Some businesses need specialty coverage for equipment, shipping and other risks. Because commercial insurance needs to be tailored to each business based on risks, it is critical to work with an agent, who will get to know your company and ensure that your coverage adequately protects your business investment.
Does business insurance cover lawsuits?
Business insurance covers lawsuits, as long as you have the appropriate business liability insurance for your situation and enough liability coverage to pay your legal costs.
To ensure that enough liability coverage is in place for extreme circumstances like a lawsuit that exceeds $1 million in damages, many businesses buy a commercial umbrella liability or excess liability policy.
Certain liability exclusions also apply, such as if an injury or damage was expected, or was caused intentionally. Some policies also have something called a “workmanship” exclusion, and some exclude coverage of punitive damages.
Liability insurance is available in many different forms, including:
- General liability
- Professional liability, errors and omissions and malpractice
- Directors and officers liability
- Product liability
- Premises or property liability
- Employers’ liability
- Employment practices liability
- Environmental and pollution liability
What does general liability insurance cover?
General Liability (GL) provides insurance protection for a company’s assets, financial obligations, legal defense, and any settlements or judgments awarded to an injured party.
If someone comes to your place of business and is injured, a general liability policy could cover their medical costs. If someone else’s property is damaged and you are found to be responsible, the repair or replacement cost could be covered. And if someone’s reputation is damaged by something you or an employee said or wrote about them, the associated costs could be covered.
It may also include claims for copyright infringement, false or misleading advertising, or libel and slander. If a patron is injured in some way in the course of doing business with your company, your general liability insurance will provide coverage.
What is a business owner’s policy?
A business owners policy, or BOP, is insurance coverage designed specifically for small or mid-sized businesses. Depending upon the insurance company, the size of a business that qualifies for a business owners policy may be based on revenue or the number of employees.
A BOP combines several types of insurance coverage in a packaged format, and can be customized to suit a particular business. Generally, this type of policy includes both property and liability coverage.
Policies may also provide coverage that includes the following:
- Property claims
- Breakdown of equipment
- Loss of income/business interruption
- Copyright infringement
- Products and completed operations
- Premises liability